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One small paragraph on page ninety-nine of the Summer Budget document could have major consequences for a lot of people.
“Tackling the hidden economy – The government will extend HMRC’s powers to acquire data from online intermediaries and electronic payment providers to find those operating in the hidden economy. We will legislate at Finance Bill 2016 to achieve this, following a consultation on the detail.”
That consultation has started and runs to 14th October. Whilst the consultation document does not name any companies specifically, it refers to compelling business intermediaries such as advertising boards or platforms, App stores and booking and reservation services to provide data.
Clearly, HMRC have firms like eBay, Amazon, Apple and Airbnb in their sights in what could potentially be one of the largest tax crackdowns on record.
On the back of the eventual legislation, HMRC is promising to launch a new digital disclosure channel to enable online businesses to submit details of untaxed revenue.
The proposals are not aimed at individuals selling personal possessions online but at businesses that fail to pay tax. However, in this context, a business could be an individual trading on eBay or renting a room out through Airbnb.
There was some potentially good news on the latter with the Rent-a-Room relief set to increase from £4,250 to £7,500 from April 2016. This relief is the amount of tax-free income available to individuals who rent a room in their main residence.
It is important to bear in mind that if additional amounts are charged for meals, cleaning or laundry these must be added to the rent payment to work out the overall income. In addition, no expenses can be deducted.
However, there may be a cloud on the horizon here if we look at the situation in Ireland where the Office of the Revenue Commissioners already have the right to compel Airbnb to provide the information that HMRC are currently seeking.
The Revenue Commissioners are now arguing that Rent-a-Room relief should not apply to such rentals on this basis that the visitors are using the rooms “as guest accommodation rather than for residential purposes”. As such, their assertions is that the host is involved in a trade akin to that of the owner of a Bed and Breakfast and, therefore, the income does not qualify for the relief.
This is a contentious view disputed by many leading tax specialists and, therefore, it will need to be tested in the courts before being levied. Moreover, there is no indication that HMRC intend to follow a similar course in the UK.
However, in the age of austerity, if the Office of the Revenue Commissioners in Ireland are successful in this, it would come as no surprise if HMRC decided to follow suit.
If you are concerned that you may have untaxed revenue or over your tax affairs in general, please contact us at welcome@cooperfaure.co.uk for an initial free and confidential consultation.
If you would like to participate in the consultation, HMRC will accept comments by email at consultation.extensionofdata-gatheringpowers@hmrc.gsi.gov.uk. The full consultation document is available at https://cooperfaure.co.uk/wp-content/uploads/2015/08/Tackling_the_hidden_economy-Extension_of_data-gathering_powers.pdf
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